John Chambers on why Cisco never bought Skype

Microsoft Skype Bates

Cisco, the networking company that many felt would be a great acquirer of Skype had looked at the VoIP and video conferencing company and declined because it couldn’t see a way to do a deal without upsetting its service provider customers, according to Cisco CEO John Chambers. Chambers, who discussed the issue with a small group of reporters yesterday via Telepresence, said, “”We had a chance to make that acquisition a long time ago.”

Cisco, which is famous for its acquisition strategy, may have made a rare flub with Skype. But since Cisco passed on the deal it’s still trying to exert some influence over Skype and its new owner Microsoft, via the European Union. Last week Cisco asked the EU to block the Microsoft-Skype merger. At the time Om wrote:

The company that once championed SIP and sold expensive PBX gear and expensive handsets for the offices has been losing influence in the new world of collaboration and communication. For a long time Cisco has dominated the unified communications business. Cisco, thanks to its nose-bleed inducing price tags, is aimed at companies with deep pocket books. Skype, on the other hand, is for real people and small businesses.

Cisco is extremely worried that Microsoft will now take Skype further into the corporate community, and that big companies will stop buying its gear. Cisco’s De Beer in his conversation earlier this morning wouldn’t go as far to admit it outright, but he did say that it was causing them problems with their corporate clients. The argument De Beer made was that just like any voice phone can talk to any other voice phone, video calls should have similar interoperability.

Chambers confirmed this when he explained that Cisco’s customers asked it to make this move because they wanted their Cisco software and the Microsoft (plus Skype) software to work together. That’s right, Skype was a threat and now with Microsoft’s corporate cachet, it’s an even bigger threat, so now Cisco wants it to play nice — or just play with it.

Chambers also said that Cisco had been trying to work out a deal with Microsoft on this, but had gotten nowhere. The problem for Cisco is that it didn’t buy Skype a while back to avoid alienating its service provider customers. However, today when IP communications are the only communications, and the core of many lines of business for Cisco, thinking about that service provider subset of customers now means Cisco frustrates another set. For Cisco the growing importance and prevalence of a single network across all lines of business is both a curse and an opportunity.

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